On December 14, the Centers for Medicare & Medicaid Services (“CMS”) announced a proposed rule to increase public awareness of financial relationships between drug and device manufacturers and certain health care providers.  The proposed rule would require manufacturers of drugs, devices, biologicals, and medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program to report to CMS any payments or other transfers of value they make to physicians and teaching hospitals.  Manufacturers would have to identify the form such payment or transfer of value takes (e.g., cash, in-kind item, stock, etc.) as well as the category describing the nature of the payment or transfer (e.g., consulting fee, education, royalty or license, etc.).  CMS proposes to exempt from the reporting requirements certain kinds of payments and transfers, including product samples, patient educational materials, discounts and rebates, and loans of devices for short-term trial periods.

The proposed rule also requires that manufacturers and group purchasing organizations (“GPOs”) report to CMS on an annual basis all ownership or investment interests in the manufacturer or GPO that were held by a physician or immediate family member during the preceding year.  CMS proposes to define a GPO to include not only traditional GPOs that negotiate contracts for their members, but also physician-owned distributors.  

CMS proposes that the reported information will be posted on a public website.  However, prior to CMS releasing the information to the public, manufacturers, GPOs, teaching hospitals, and physicians would be provided an opportunity to review and correct the information.   CMS proposes that applicable manufacturers and GPOs should register with CMS prior to submitting the required information.  The first opportunity for registration and data submission would be January 1, 2013, and all applicable manufacturers and GPOs would be required to submit reports on or before March 31, 2013 and on or before the 90th calendar day of each year thereafter.  Information would be made available to the public by September 30, 2013 and by June 30th of each year thereafter.

Applicable manufacturers and GPOs that fail to submit a required report to CMS would be subject to fines of between $1,000 and $10,000 for each payment or transfer or value, or ownership or investment interest, not reported, up to a maximum of $150,000 per annual submission.  ”Knowing” failures to report would bring increased fines of $10,000 to $100,000 for each payment or transfer or value, or ownership or investment interest, not reported, up to a maximum or $1,000,000 per annual submission.

CMS is accepting comments on the proposed rule until February 17, 2012.

For more information about this proposed rule, please contact any member of Taft’s Health & Life Sciences Practice Group.